Escada: the rise and fall of a fashion house

It may be a surprise to many, but not too long ago the top luxury fashion label for ladies in the world actually hailed from Germany. For a long time, Escada, native to Aschheim, a suburb of Munich, hit the mark with the rich and the beautiful with its opulent style. Meanwhile, the glamour has faded. In August, the company hit rock bottom: Escada was forced to declare bankruptcy after a last ditch rescue operation had failed. But there is still hope for a renaissance.

The fashion enterprise was founded in 1976 by Margaretha and Wolfgang Ley. Margaretha, a Swedish ex-model, was responsible for the design and the inventor of the typical Escada style, while her husband, a genuine businessman was in charge of the finances, travelling and establishing contacts throughout the world. Together, they made the brand successful.

The death of Margaretha in 1992 was the breaking point. Although the company initially continued on its economic success path – the Escada brand alone generated income in the amount of 900 million German Marks at the end of the 1990s - the demise of the company started with the tragic event. The label was unable to get away from the founder’s characteristic style, namely the ostentatious colourful luxury with the typical gold buttons. While this opulence continued to be successful in Russia or the Middle East for a while longer, Munich missed the latest luxury fashion trends: Escada neither responded to the tendency to subtle understatement as it was mainly represented by Prada, nor did it appoint a young innovative designer to revitalise the label, an action that brought many other traditional brands back to a successful path. What’s more, the Escada company group was bogged down with the acquisition of new, less prestigious brands established in the middle price range segment, thus weakening the reputation of the main brand.

Founder Wolfgang Ley, who used to defend the company’s independence, believed that the only option to resolve the growing economic troubles was to get external investors on board in 2003 which increasingly eroded his own management role. Finally, in 2006 Russian principal stockholder Rustam Akseneko forced Levy to hand over the directorship. But the succeeding bosses were equally unable to prevent the downfall of the company group. At last, Jean-Marc Loubier - after all a former LVMH manager - was forced to vacate his position last year, after a brief and overall unsuccessful mandate.

He was succeeded by one last hopeful: Bruno Sälzer who had been managing the meanwhile most important German fashion company group – Hugo Boss – with great success, but was ousted following a dispute with the new principal stockholder Permira. However, he ultimately ran out of time to spare the company from bankruptcy. The situation of the company group was too desperate; after all, it reported a loss of 70.2 million Euros in the past fiscal year alone.

Indeed, Sälzer succeeded in introducing a fresh breeze to the company and in selling the unprofitable subsidiary – but his ambitious restructuring plans designed to save the now severely crippled company failed miserably. The subscribers of a corporate bond ultimately refused to waive the majority of their entitlements which would have provided a temporary relieve to the company. And so Escada was forced to declare bankruptcy last month.

The brand’s future is now up in the air. According to reports, a number of investors declared interest in Escada, but the negotiations to decide which investor will be received are currently ongoing. According to reports, the current liquidator Christian Gerloff who is committed to prevent the asset stripping at all costs, was given time until the beginning of November to save the once glorious establishment. Otherwise, the opulent retrospective Escada treated itself to within the scope of the Mercedes-Benz Fashion Week at the beginning of July in Berlin was the final swan song for a major brand.

Photo: Mercedes-Benz Fashion Week Berlin